Good morning, investors. AI has changed the game for chip stocks. Over the past 12 months, the S&P Global Semiconductor Index is up 182%, while the S&P 500 is up just 22%. That’s more than 8x better than the market.
But after a rally like this, price matters. Today, we’re looking at which chip stocks still offer growth at a fair price.
Chip Stocks Value Map
Chip stocks have one big problem.
We analyzed 18 of the biggest semiconductor stocks in the U.S.
And surprisingly, many don’t look extremely expensive when you include their expected growth.
But there is one major risk hiding behind the numbers.
The entire AI chip story depends on one thing:
Execution.
The average company in the sample trades at:
Expected EPS growth (next 5 years): 44% annually
Forward P/E ratio: 35x
On paper, that actually looks reasonable.
Investors are paying high valuations because they expect unusually high earnings growth.
But, historically, after adjusting for the cyclical nature of semiconductors, industry earnings have grown closer to 15% annually.
Meaning many chip companies would need to deliver almost 3x the historical growth rate for years.
When expectations are this high, companies don’t need to fail. They only need to grow slower than expected.
Is Adobe Cheap?
Adobe fell to levels not seen since 2019.
But the latest earnings were actually strong:
Revenue: $6.62B vs $6.46B expected
EPS: $5.96 vs $5.82 expected
AI ARR: $500M+ (+200% YoY)
2026 revenue outlook raised to $26.6B
However, investors are focused on one question:
Does AI replace Adobe?
The numbers show the disconnect:
Over the last 5 years:
Forward earnings: +110%
Forward P/E: 50x → 15x
This is similar to 2013, when Adobe looked expensive and risky during its subscription transition. That became its biggest growth era.
The difference today? AI is a much bigger threat.
If AI weakens Adobe’s moat, the market is right.
If Adobe successfully integrates AI into its ecosystem, today’s valuation could look very different.
One narrative will eventually be wrong.
Microsoft Bull
Is Microsoft a buy?
Bill Ackman started building his Microsoft position when the stock traded around 21x forward earnings.
Today, Microsoft trades near 21.4x forward earnings again.
That puts the valuation almost exactly back where Ackman first saw an opportunity.
Microsoft is now Pershing Square’s 3rd biggest position:
Position value: $2.2B
Portfolio allocation: 15%
Average buy price: $435/share
The interesting part is Ackman’s recent pattern.
He has been rotating into Big Tech names when sentiment weakens and valuations compress.
IPO Hangover
Big launches don’t equal big returns.
Look at some of the biggest IPO stories:
Uber fell 70% from its IPO price
Robinhood collapsed 92%
Coinbase fell 93%
Rivian crashed 95%
Why does this happen so often?
1. IPO hype creates high expectations
Valuations are built on future growth. If reality disappoints, stocks can fall quickly.
2. Lock-ups create selling pressure
After 90–180 days, insiders can sell shares, adding more supply to the market.
3. Excitement fades
Many investors buy because of FOMO. When the hype slows, sentiment changes fast.
We’re not saying SpaceX will crash.
But the odds are stacked against it.
SpaceX Winners
The biggest returns from IPOs are often made before the company goes public.
SpaceX is the perfect example.
At a +$1.75 trillion valuation, early investors are winning:
Elon Musk
Invested $100M in 2002
Estimated 42% stake → $735B
Founders Fund (Peter Thiel)
Invested $20M in 2008
Estimated stake value → $26B–$52B
Alphabet (Google)
Invested $900M in 2015
Estimated stake value → $105B–$122B
Fidelity Investments
Invested $100M in 2015
Estimated stake value → $35B–$52B
Baillie Gifford
Invested $273M in 2018
Estimated stake value → $17B–$26B
By the time great companies go public, much of the early wealth has often already been captured by the first believers.
Don’t Keep Us A Secret
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